Astrazeneca Restructuring

Case study: AstraZeneca restructuring

by Andrew Jack – Financial Times: January 29th 2010.

AstraZeneca, the Anglo-Swedish pharmaceutical group, will cut 8,000 staff over the next four years as part of a $2bn (£1.2bn) restructuring to counter falling sales as competition intensifies over its prescription medicines. Efficiency gains helped it lift full-year earnings per share 24 per cent to $6.32 on revenue up 4 per cent to $32.8bn. However, the company cautioned that earnings this year could drop to as low $5.75 a share on a "mid single-digit" decline in sales as patents expire. Pre-tax profits rose from $8.7bn to $10.8bn. In an unusually long-term forecast, AstraZeneca also warned that annual sales could fall to as low as $28bn in the years up to 2014, after which it anticipated "a period of more consistent revenue growth".

David Brennan, chief executive, said: "In 2009, we delivered a strong financial performance, exceeding the targets we set at the beginning of the year . . . Our plans for the next five years confirm our commitment to research-based, innovative biopharmaceuticals." But shares in AstraZeneca fell 92.41p to close at £29.53, in spite of efforts to placate shareholders with a $1bn share buy-back. The group will also increase its 2009 dividend by 12 per cent to $2.30 and said it will maintain or increase the dividend each year up to 2014, regardless of any short term drop in performance.

Mr Brennan maintained his long-standing rejection of "large scale mergers and acquisitions". But in a first symbolic shift towards a strategy of diversification from patented drugs adopted by many of his rivals, he signalled a modest expansion into generic drugs branded with AstraZeneca's name in emerging markets such as India. Anders Ekblom, head of development, said the group would cut by a quarter the 40-50 disease areas it was researching over the next two years, with R&D absorbing half of the restructuring programme that aims to produce $1.9bn in...